Related papers: Mean-Reverting Portfolio Design with Budget Constr…
We use the martingale method to discuss the relationship between mean-variance (MV) and monotone mean-variance (MMV) portfolio selections. We propose a unified framework to discuss the relationship in general financial markets without any…
In this paper, we revisit the relationship between investors' utility functions and portfolio allocation rules. We derive portfolio allocation rules for asymmetric Laplace distributed $ALD(\mu,\sigma,\kappa)$ returns and compare them with…
Changes in market conditions present challenges for investors as they cause performance to deviate from the ranges predicted by long-term averages of means and covariances. The aim of conditional asset allocation strategies is to overcome…
We propose a distributionally robust formulation of the traditional risk parity portfolio optimization problem. Distributional robustness is introduced by targeting the discrete probabilities attached to each observation used during…
We present an exact algorithm for mean-risk optimization subject to a budget constraint, where decision variables may be continuous or integer. The risk is measured by the covariance matrix and weighted by an arbitrary monotone function,…
Portfolio diversification is one of the most effective ways to minimize investment risk. Individuals and fund managers aim to create a portfolio of assets that not only have high returns but are also uncorrelated. This goal can be achieved…
In this work, we consider the optimal portfolio selection problem under hard constraints on trading amounts, transaction costs and different rates for borrowing and lending when the risky asset returns are serially correlated. No…
We consider monotone mean-variance (MMV) portfolio selection problems with a conic convex constraint under diffusion models, and their counterpart problems under mean-variance (MV) preferences. We obtain the precommitted optimal strategies…
We study optimal investment in a financial market having a finite number of assets from a signal processing perspective. We investigate how an investor should distribute capital over these assets and when he should reallocate the…
We consider the portfolio choice problem for a long-run investor in a general continuous semimartingale model. We suggest to use path-wise growth optimality as the decision criterion and encode preferences through restrictions on the class…
Regression is widely used by practioners across many disciplines. We reformulate the underlying optimisation problem as a second-order conic program providing the flexibility often needed in applications. Using examples from portfolio…
For decision making under uncertainty, min-max regret has been established as a popular methodology to find robust solutions. In this approach, we compare the performance of our solution against the best possible performance had we known…
In this paper we develop a concrete and fully implementable approach to the optimization of functionally generated portfolios in stochastic portfolio theory. The main idea is to optimize over a family of rank-based portfolios parameterized…
Modern portfolio theory has provided for decades the main framework for optimizing portfolios. Because of its sensitivity to small changes in input parameters, especially expected returns, the mean-variance framework proposed by Markowitz…
The idiosyncratic (microscopic) and systemic (macroscopic) components of market structure have been shown to be responsible for the departure of the optimal mean-variance allocation from the heuristic `equally-weighted' portfolio. In this…
We derive scaling limits for integral functionals of It\^o processes with fast nonlinear mean-reversion speed. We show that in these limits, the fast mean-reverting process is "averaged out" by integrating against its invariant measure.…
Statistical arbitrage methods identify mispricings in securities with the goal of building portfolios which are weakly correlated with the market. In pairs trading, an arbitrage opportunity is identified by observing relative price…
In this short note, we consider mean-variance optimized portfolios with transaction costs. We show that introducing quadratic transaction costs makes the optimization problem more difficult than using linear transaction costs. The reason…
In the portfolio multiobjective optimization framework, we propose to compare and choose, among all feasible asset portfolios of a given market, the one that maximizes the product of the distances between its values of risk and gain and…
It has been assumed that arbitrage profits are not possible in efficient markets, because future prices are not predictable. Here we show that predictability alone is not a sufficient measure of market efficiency. We instead propose to…